A GUIDE TO DOING BUSINESS
IN NIGERIA
FORMS OF BUSINESS ENTERPRISE
Business activities
may be undertaken in Nigeria through any of the following
vehicles; that is:
(i) Private or
Public limited liability Company;
(ii) Unlimited
liability company;
(iii) Company
limited by Guarantee;
(iv) Foreign Company
(branch or subsidiary of a foreign company);
(v)
Partnership/Firm;
(vi) Sole
Proprietorship;
(vii) Incorporated
Trustees;
(viii)
Representative Office.
All business
enterprises, both local and foreign must be registered with the
Registrar-General of
the Corporate Affairs Commission (“Registrar of
Companies”), and
must comply with the internal regulations applicable to
particular
businesses. The law governing the formation and regulation of
business enterprises
in Nigeria is the Companies and Allied Matters Act, 1990
(“CAMA”), and under
this law is the Corporate Affairs Commission, which is
the body responsible
for the registration and regulation of companies.
Foreigners may
invest and participate in the operation of any enterprise in
Nigeria. By virtue
of the provisions of the CAMA, a foreign investor, wishing
to set up business
operations in Nigeria is obliged to take all steps necessary
to obtain local
incorporation of a Nigerian company, or branch or subsidiary
of an existing
company, which would be a separate and distinct entity from
its parent company.
Until so incorporated, a foreigner may not carry on
business in Nigeria
or exercise any of the powers of a registered company.
The CAMA, however,
sets out exceptions to the general rule that all foreign
investors doing
business in Nigeria must incorporate in Nigeria. These
exceptions include
companies engaged by the Federal Government to
execute specific
projects, companies undertaking approved loan projects on
behalf of donor
countries or international organizations, and foreign
government owned
companies engaged wholly in export promotion activities.
These exemptions are granted for a
fixed period of time (usually three
years), are hardly ever renewed and
may be revoked by the Federal
Executive Council. Investors
envisaging a long-term existence in Nigeria are
therefore well advised to incorporate
a local company.
Foreign companies may also set up
Representative Offices in Nigeria. A
Representative Office however, cannot
engage in business, conclude
contracts or open or negotiate any
Letters of Credit. It can only serve as a
promotional and/or liaison office. In
this circumstance, its local operational
expenses have to flow in from the
foreign company. A Representative Office
also must be
registered with the CAC.
REGISTRATION OF A COMPANY AND APPLICATION FOR START-UP
APPROVALS
As stated earlier, under the
Companies and Allied Matters Act, 1990
(“CAMA”) the body responsible for the
registration and regulation of
companies is the Corporate Affairs
Commission (“CAC”), which has its head
office in Abuja, the Federal Capital
Territory.
Procedure for Company Incorporation
An application for incorporation is
made to the Registrar-General of the CAC.
Prior to the application being made,
submitting a written application to the
CAC, and paying a prescribed fee may
reserve the name of the proposed
company. Subsequently the application
to the Registrar-General is submitted
in the prescribed form along with the
following documents:
• A copy of the
Memorandum and Articles of Association of the
Company (which must be subscribed to
by at least two persons,
together holding at least 25% of the
company’s authorized share
capital together with evidence of
payment of stamp duty.
• A statement of the
authorized share capital of the company together
with evidence that the stamp duty
payable in respect of the amount
of share capital has been paid.
• A statement of the
particulars of the initial directors of the company,
of which there must be at least two.
• A notice of the
situation of the registered office of the company.
• A declaration, sworn
to by a Lawyer that all matters preliminary to the
registration of the company have been
complied with.
Stamp duty and filing fees are
payable to the Federal Commissioner for
Stamp Duties and the Registrar -
General of Companies respectively. If the
application is approved, a
Certificate of Incorporation will be issued and the
company can commence business subject
to its having obtained the
necessary investment
approvals.
Investment Authorizations and Approvals
The principal laws regulating foreign
investment in Nigeria are, the Nigerian
Investment Promotion Commission (“NIPC”)
Act No. 16 of 1995, and the
Foreign Exchange (Monitoring and
Miscellaneous Provisions) Act No. 17 of
1995.
Once registration is completed, there
are other approvals that the foreign
Investor would require, to secure
enhanced returns from an investment and
remit the proceeds of such
investment. Some of these approvals are
mandatory, others are only required
where the company wishes to employ
expatriates or take advantage of
certain incentive schemes. The nonmandatory
approvals are asterisked (*).
Registration with the NIPC
The Nigerian Investment Promotion
Commission (“NIPC”) was established
under the Nigerian Investment
Promotion Commission Act, 1995, which
provides that any enterprise in which
there is foreign participation must be
registered with the NIPC. The NIPC
Act permits foreigners to own up to
100% of any business enterprise with
the exception of enterprises on the
“negative list” of the Act. The
negative list includes enterprises involved in
the production of and dealing in
arms, ammunition, narcotic drugs and
psychotropic substances.
Procedure for obtaining NIPC
Registration
• Application is made
to the Nigerian Investment Promotion Commission
• Completed copies of
the NIPC Form 1 (Original and 3 copies)
• Original copy of
receipt of purchase of NIPC Form 1 (and three
copies)
• A copy of COMPANYs’
Certificate of Incorporation (and three copies)
• Evidence that
COMPANY has a minimum share capital of
=N=10million. (3 copies)
• COMPANYs’ Allotment
of shares and Particulars of Directors (3 copies)
• Details of the
shareholding structure of COMPANY (3 copies)
• Joint Venture,
Shareholders’ or Partnership Agreement, where
applicable (3
copies).
Business Permit
In order for an enterprise in which
there is foreign participation to undertake
any business in Nigeria, it must
obtain a business permit from the Ministry of
Internal Affairs. A business permit
will only be granted in respect of
companies having an authorized share
capital of at least =N=10,000,000.00
(approximately 80,000 US Dollars).
One of the documents that a company
applying for business permit is
required to submit is a Certificate if Capital
Importation to evidence the
importation of the foreign investor’s
capital/equity contribution into Nigeria.
Procedure for obtaining Business
Permit
• Application is made
to the Ministry of Internal Affairs
• Completed copies of
the NIPC Form 1 (Original and 3 copies)
• Original copy of
receipt of purchase of NIPC Form 1 (and three
copies)
• A copy of COMPANYs’
Certificate of Incorporation (and three copies)
• Evidence that
COMPANY has a minimum share capital of
=N=10million. (3 copies)
• COMPANYs’ Allotment
of shares and Particulars of Directors (3 copies)
• Details of the
shareholding structure of COMPANY (3 copies)
• Joint Venture,
Shareholders’ or Partnership Agreement, where
applicable (3 copies).
Certificate of Capital Importation
Investors who wish to be able to
remit dividends to non-resident
shareholders or repatriate capital on
disinvestments must ensure that they
obtain a Certificate of Capital
Importation from the Nigerian bank through
which the payment is transferred into
Nigeria.
Procedure for Obtaining Certificate
of Capital importation (CCI)
• Application will be
made to COMPANY’s bankers
• The foreign
shareholders will instruct their bank (“the remitting bank”)
by telex to transfer the necessary
funds either directly to COMPANY’s
bankers or to their
foreign affiliate;
The transfer must be accompanied by a
telex stating that the money
being remitted to the bank is for the
account of COMPANY and that
the money represents the foreign
investors’ capital contribution to the
equity of COMPANY;
• Upon confirmation
that the funds have been remitted to Nigeria,
COMPANY is required to send a formal
letter of application to the
receiving bank to issue a CCI in
respect of the equity contribution.
• The following
documents must be submitted together with the letter
of application:
o
A Board
resolution of COMPANY authorizing the foreign
investment;
o
A
letter from COMPANY stating the purpose for which the
money has been remitted;
o
A copy
of the certificate of incorporation of COMPANY;
o
A copy
of the swift message from the remitting bank.
• If satisfied with
the documentation the receiving bank will issue a CCI
in respect of the funds. The
receiving bank is required to notify the
CBN whenever it
issues a CCI.
Expatriate Quota*
A company wishing to employ
expatriates must obtain an Expatriate Quota
position for each expatriate it
wishes to employ. The Expatriate Quota
establishes the maximum number of
expatriates that the enterprise may
employ. A company having a paid-up
share capital of not less that
=N=10,000,000.0 (Ten million Naira
only) (approximately 80,000 US Dollars)
is entitled to one automatic quota
positions, while a company capitalized at
=N=20,000,000.00 (twenty million
Naira only) (approximately 155,000 US
Dollars) is entitled to four
automatic quota positions.
Procedure for obtaining Expatriate
Quota
• Application is made
to the Ministry of Internal Affairs
• In addition to the
requirements listed under Business Permit
application, the following
requirements have to be met for Expatriate
Quota applications:
• Evidence of
acquisition of operational machinery and equipment
Management and Technical Services
Agreement
• Minimum authorized
share capital of =N=10million
• Tax Clearance
Certificate
• Company applying for
Permanent Until Reviewed (PUR) Quota slots
must show evidence of payment of tax
for minimum of =N=1 million.
• Names, addresses,
qualifications and positions to be occupied by the
expatriate
• Project
Implementation Program
• Training Program for
Nigerians and a Management Succession
Schedule
Approval for Transfer of Technology and other Agreements*
By virtue of the provisions of the
National Office for Technology Acquisition
and Promotion Act, 1992 any agreement
under which a foreigner is to
provide foreign technology,
management, or assistance, to a Nigerian
company must be approved by the
National Office for Technology Acquisition
and Promotion (“NOTAP”). Fees payable
for the provision of such
technology or services must also be
approved by the NOTAP.
Registration with the Department of Petroleum Resources*
Companies that wish to engage in
petroleum operations in Nigeria are
required to register with the
Department of Petroleum Resources (“DPR”).
The DPR issues Permits, upon
application, in respect of oil exploration and
production activities, as well as oil
service activities. Fees payable depend on
the category of operations for which
the company applies.
THE TAX SYSTEM
The Tax Structure and Taxing Authorities
The federal, state, and local
governments levy taxes. The Federal Board of
Inland Revenue (“FBIR”) administers
Federal Taxes through its operational
arm called the Federal Inland Revenue
Service (“FIRS”), State taxes are
administered by the Internal Revenue
Boards of respective States, while the
various councils
administer local Government taxes.
Principal Taxes
Taxes on income and gains
• Companies Income Tax
• Personal Income Tax
• Capital Gains Tax
• Petroleum Profits
Tax
Taxes on transactions
• Value Added Tax
• Stamp Duty
• Customs and Excise
Duty
Other taxes
• Sales Tax (Lagos
State only)
• Local Government
taxes
Double Taxation Relief
Nigeria currently has seven
comprehensive double tax treaties. Treaties on
income and capital gains are
currently in force with:
• United Kingdom and
Northern Ireland
• Canada
• France
• Netherlands
• Belgium
• Romania
• Pakistan
CHECKLIST FOR ESTABLISHING A BUSINESS IN NIGERIA
Incorporate
Local Company
Register
with Tax Authorities and Obtain First Tax Clearance
Certificate
Open Corporate Bank
Account/s in the name of the Local Company
and obtain a Certificate
of Capital Importation from the Bank in
respect of any imported
capital sum
Apply for Business Permit and
Expatriate Quota
Obtain Residence Permits for
Expatriate Staff
Register with Appropriate
Regulatory Authorities Relevant to the
Company’s Business (such
as NCC, DPR, NAFDAC, etc.)
Secure Office Space/ residential
accommodation for Expatriate Staff
These are the first steps
to be taken by any person that wishes to
establish business in
Nigeria. At the end of the first financial year, the
company would be required
to file Tax and Annual Returns. In addition,
the Company would be
required to appoint External Auditors and a
Company Secretary.
For further information and help contact:
07067797854
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